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Invoice Factoring for SMEs

Invoice factoring for SMEs works by selling unpaid invoices to a factoring facility, the cash is then advanced to the business to help with their cash flow. Additional benefits and options include debt collection and confidentiality with invoice factoring. SMEs can then concentrate on running and growing their business instead of chasing payments.

SME Invoice Factoring – how does it work?

Invoice factoring for SMEs works by an invoice factoring facility purchasing the SME’s unpaid invoices for a fee, then advancing them up to 90% of the cash value each unpaid invoice. This results in a healthier cash flow for the business. So rather than waiting 30, 60 or even 90 days for the invoice to be paid the cash is made available within 48hours

Here is a step by step guide:  

Step 1 – The business raises an invoice to their customer (another business) detailing the agreed cost and payment terms. For example; the customer owes £50,000 due to be paid within 60 days.


Step 2 – A copy of the invoice is then sent over to the chosen invoice factoring lender. It is then evaluated and typically within 48hours up to 95% of the cash will be released and paid you’re your account.

This would mean, taking the example above, that up to £47,500 would be available in your bank account within 48hours of the invoice being raised. This would greatly aid your business cash flow and not result in you having to wait up to 60 days for the invoice to be paid.


Step 3 – The invoice factoring facility wait until the payment terms are reached and then chase for the money, this can be confidential if your business prefers and customers would not know you are using a facility.

Once the money has been collected the factoring facility send you the remaining amount not paid in step two minus their invoice factoring fee.

So based on the example above you will receive £2,500 minus the invoice factoring fee.

SME Invoice Factoring – The Benefits

Invoice factoring ensures your business has the cash available to reinvest, pay bills, staff and continue to grow your business. The added debt collection service, frees up more time to concentrate on business activities.




Alliance Commercial Finance works with over 25 unique providers helping SME’s with their cash flow by providing invoice factoring solutions to meet their current and long-term cash-flow requirements.


To find out more about how we could help your business, fill in our quick contact form and a member of the team will come back to you.


Alternatively if you want to get in touch sooner please contact us on 01789 761374 or email us on


Added: 18 Apr 2016 12:10

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